Wednesday, November 19, 2008

Barney Frank: Bailout Required To Fend Off Union Busting

Barney Frank says a bailout of the automakers is a must. Frank also goes on to say the $25 billion is just the down payment and much more taxpayer money will be required to ensure Union labor is guaranteed the UAW average of $73/hour in wages and benefits. Obviously Mr. Frank does not understand that one of the main reasons US auto makers are unable to compete is direct labor costs that are 70% higher than their competitors.

Mr. Frank says corporations should not go bankrupt because it would undo the gains made by unions. Herein lies the real issue. American automakers are not competitive. Japanese automakers consistently outperform the big three in quality and quantity. One of the real reasons for the Japanese automakers better quality and quantity is labor rates. Japanese automakers pay approximately $43 per hour for wages and compensation while the Big Three pay $73 per hour. This $30 per hour direct labor cost advantage allows the Japanese to invest in quality and efficiencies. The efficiencies reduce other costs which allows the Japanese to make better use of the resources. The higher quality allows the Japanese automakers to sell more vehicles.

A taxpayer bailout is not the answer without mandatory renegotiation of labor contracts. The US auto industry can not afford to continuously over pay union workers. The answer for the auto industry is bankruptcy. They need to redefine their business practices and become far more efficient. Bailing them out is nothing more than a sign that the Big Three can do whatever they want because the American taxpayer will always be there to bail them out. A message needs to be sent to both the management and unions that mismanagement of a corporation does not warrant American taxpayer money. We can not reward the failed business practices of GM, Ford, Chrysler, and the UAW. All of them are complicit in the failure of their industry.

The automakers displayed their lack of judgment by utilizing private jets to carry them to Washington DC in an effort to beg the Congress to feed them Taxpayer funds. The impending bankruptcy is of little concern when CEO comfort is at stake. Mr. Frank please explain why the American taxpayer should bailout companies and Unions that don't care enough about their corporations to cut frivolous costs. Please explain why Unions should not be renegotiating their contracts. Obviously neither industry management nor labor really cares about the business. If the internal stakeholders don't show concern why should the taxpayers?

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